Since 1990, the California Employment Development Department (EDD) has retained the statutory authority to issue penalties for failure to file Forms W-2 and/or 1099. Until this year, effective January 1, 2018, taxpayers assessed the steepest of those penalties, Unemployment Insurance Code section 13052.5, did not have a right to petition the assessment. However, since enactment of Assembly Bill 1695 on July 24, 2017, and effective January 1, 2018, Section 13052.5 is now petitionable before the California Unemployment Insurance Appeals Board.
Effective January 1, 2017, employers with 10 or more employees are required to electronically file and pay their EDD employment tax returns, wage reports, and payroll tax deposits. All other employers will be subject to this requirement effective at the start of 2018.
California's Employment Development Department publishes a new Employer's Guide (DE 44) and Household Employer's Guide (DE 8829) each year to help you understand your rights and responsibilities if your business hires employees.
The Law Office of Williams & Associates, PC has been informed that the California Employment Development Department has recently won at least two administrative decisions against Uber in appeals of Obstructed Claims for Unemployment Insurance Benefits, before the California Unemployment Insurance Appeals Board. In plain English, this means that the state of California determined that Uber drivers are misclassified as independent contractors, that Uber should have paid state employment taxes and withholding on the payments rendered to those drivers.
When I left the California EDD's Legal Office over two years ago, I predicted that the "rideshare" software application companies, Uber and Lyft, would soon come under scrutiny for worker classification issues. My prediction was correct. For the past few months, developments have occurred in two federal wage and hour lawsuits involving these two companies, and centering on issues of worker classification.
"Self-employed" individuals include sole proprietors and independent contractors. The Self-employment income can include income you received for part-time work. This is in addition to income from your regular job. According to the IRS, there are a few things to keep in mind in reporting income. (http://www.irs.gov/uac/Are-You-Self-Employed-Check-Out-These-IRS-Tax-Tips)
When it's time to close a business in California, there are many important steps that must be followed to ensure the requirements of the IRS and the California tax agencies are met. Failing to do so can result in the tax agencies coming back years later to collect tax on income you may not have earned, or tax on workers you no longer employed. Different rules apply depending on the type of entity and whether there are shareholders, assets to distribute and employee benefit or retirement plans in place. In addition to filing final income tax returns, business owners should also be sure to file other applicable final tax returns including sales and use tax returns and employment tax returns. The IRS, California Franchise Tax Board, Board of Equalization and Employment Development Department each provide guidance on the steps to following when closing a business.
The Intersection of Employment Tax and Employment Law
On October 7, 2013, Governor Jerry Brown signed Assembly Bill 576 into law, authorizing a pilot program to create the "Revenue Recovery and Collaborative Enforcement Team" (RRCET) consisting of an alliance primarily between the California Department of Justice (DOJ), the Franchise Tax Board (FTB), the State Board of Equalization (BOE), and the Employment Development Department (EDD) in an effort to combat "criminal tax evasion associated with the underground economy."
1. The CUIAB